America has witnessed a similar cycle of oligarchic corruption starting in the 1760s, 1850s, 1920s, and 2000s:
- Economic Royalists infiltrate critical institutions and rig political and economic systems to favor elites.
- 1760s: Royal governors run roughshod over colonial farmers; The East India Company, whose investors were primarily wealthy aristocrats, is given monopoly trading rights in the colonies. (The Tea Act was basically a corporate tax break for it.)
- 2000s: Vice President Dick Cheney’s company Halliburton is given no-bid contracts to handle military services in Iraq; American taxpayers bail out failed banks; Billionaire Warren Buffet pays a lower tax rate than his secretary; America’s medical system is dominated by profit-maximizing, health-minimizing insurance companies.
- Rigged systems erode the health of the larger society, and signs of crisis proliferate. Developed by British archaeologist Sir Colin Renfrew in 1979, the following “Signs of Failing Times” have played out across time in 26 distinct societies ranging from the collapse of the Roman Empire to the collapse of the Soviet Union:
- Elite power and well-being increase and is manifested in displays of wealth;
- Elites become heavily focused on maintaining a monopoly on power inside the society; Laws become more advantageous to elites, and penalties for the larger public become more Draconian;
- The middle class evaporates;
- The “misery index” mushrooms, witnessed by increasing rates of homicide, suicide, illness, homelessness, and drug/alcohol abuse;
- Ecological disasters increase as short-term focus pushes ravenous exploitation of resources;
- There’s a resurgence of conservatism and fundamentalist religion as once golden theories are brought back to counter decay, but these are usually in a corrupted form that accelerates decline.
- The crisis reaches a breaking point, and seemingly small events trigger popular frustration into a transformative change. If the society enacts effective reforms, it enters a new stage of development. If it fails to enact reforms, crisis leads to regression and possibly collapse.
- 1776: Lexington and Concord’s “shot heard round the world”; the Declaration of Independence; America becomes unified nation aimed at liberty and justice for all.
- 1933: Under huge public pressure, FDR turns from a standard New York politician to a champion of social and economic reform; government work-programs revitalize the nation’s infrastructure, and reforms such as the Glass-Steagall Act reduce bankers’ ability to abuse the system; Post-FDR America witnesses the longest surge of cross-scale prosperity and the largest increase in the middle class in history.
- Over time, transformed societies forget why they implemented reforms; Economic Royalists creep back and the cycle starts a new.
- 1980-2000s: Reagan removes the Fairness Doctrine and stops enforcing antitrust laws; Economic elites argue we need to modernize finance by getting rid of Glass-Steagall; Tax rates on the wealthy plummet while infrastructure crumbles; The Supreme Court supports Citizens United and guts the Voting Rights Act; Gerrymandering increases.
We have forgotten the lessons of the 1760s, 1850s, and 1920s. We have let Economic Royalists hijack our democracy, and turn our economy into their money machine. Now the middle class is evaporating, infrastructure is crumbling, and pressure is reaching a breaking point. Anti-establishment candidates are on the rise, and no one knows how things will turn out.
What then shall we do? The first step is to remember that our times also hold a positive possibility – a transformation akin to those which followed 1776, 1865, and 1945. Honest reformers from education and agriculture to energy and finance are already reinventing their fields. Regenerative, resilient “New Economy” experiments are bubbling up everywhere. Thanks to the Internet, communication is faster and more effective than at any other time in history – so word is getting out.
The second step is to remember that the vast majority of people participating in today’s economic system are not corrupt, they just believe today’s dominant belief system is some combination of good, right, necessary, or inevitable. In today’s case, most of our political-economic elites – both Republican and Democrat, right and left – genuinely believe that today’s neo-liberal economic frame is the path to prosperity, a kind of “win-win” strategy of competitive markets that, in the end, will benefit both elite and global interests as a whole.
So, for the most part, we are not dealing with evil people, but what sociologists call a “social construction of reality.” Over time, human beings construct their everyday systems and practices around a set of widely held beliefs. They do this by creating a matrix of rewards and punishments that keeps everyone in line with the society’s dominant beliefs, for example, incentives to compete, and rewards for maximizing profit.
Unfortunately, this (domination) matrix holds even as people begin to realize that the system is not working. What we’re now facing is a combination of:
- people who still believe; and
- people who doubt, but:
- Would have to sacrifice their livelihood to act on it; or,
- Are willing to leave the system but don’t necessarily know what comes next.
Today’s big challenge is twofold. First, we need to find a way to unite today’s many disjointed reform efforts into the coherent and effective reinvention we so desperately need. This unity will require solid science, compelling story, and positive dream. Secondly, since hierarchies are absolutely necessary for groups beyond a certain size, this time we must figure out how to create healthy hierarchical systems that effectively support the health and prosperity of the entire social, economic, and environmental system including everyone within. In short, our goal must be to figure out how to end oligarchy forever, not just create a new version of it. This is a topic I will take up in my next blog.
The last step is to keep our eyes on the prize. As Peter Drucker explained in 1995: “Every few hundred years in Western history there occurs a sharp transformation. Within a few short decades, society ─ its worldview, its basic values, its social and political structures, its key institutions ─ rearranges itself…Fifty years later, there is a new world, and people born then cannot even imagine the world in which their grandparents lived…We are currently living through such a time.”
Ours is not a simple task, but we can take hope from the fact that our ancestors succeeded under much harsher conditions.
 This cycle has occurred every 80 to 90 years throughout American and much of world history. It is detailed in books such as Strauss and Howe’s The Fourth Turning, and Thom Hartmann’s The Crash of 2016. See Strauss, W. & Howe, N., (1996). The Fourth Turning: What the cycles of history tell us about America’s next rendevouz with destiny.
 Renfrew, Colin. 1979. Systems collapse as social transformation: Catastrophe and anastrophe in early state societies. In Renfrew C. and Cooke, K.L. (eds.), Transformations: Mathematical approaches to culture change. New York: Academic Press, 481-506.
 Cited in Drucker, Peter. 2009. Managing in a Time of Great Change.
What’s the Matter with America? The Breakdown of Love, Strength & Intelligence The following guest blog post is by Dr. Sally Goerner, Capital Institute’s Science Advisor on June 21, 2016
Why have millions of American voters selected Donald Trump, a narcissistic, neo-fascist salesman whose policies run from irrational to dangerous? There are, of course, many facets to this conundrum. Here, I explore its deeper psychological underpinnings in hopes that our leaders might better understand its causes and cures. In particular, I’m going to use the Triune Brain understanding of human nature to explain why this neo-fascist upsurge is a classic consequence of the breakdown of the bonds of love, strength, and intelligence that hold a society together and why rebuilding these bonds is critical to our survival.
Brain research suggests the behavior patterns of love, strength and intelligence are hardwired into the human brain because they support three critical social functions: community, power, and learning, respectively.
- Love supports community, allowing diverse individuals to work together for common-cause, be it a family, a business, or a nation.
- Strength is central to authority, the social power used to coordinate communities and maintain order and defense in large groups.
- Intelligence enhances learning of course, but thinking is swayed by the two lower brains because they get information first, and pass it along with distinct emotional hues.
While all three brain functions operate in most every individual, one or the other of them often dominates in particular individuals and groups – a situation that can be seen in today’s Right-Left divide.
- The Right emphasizes strength: rugged individualism, self-reliance, and traditional order.
- The Left emphasizes caring: partnership, community, and openness to non-traditional alternatives.
While such emphases help unify groups, love, strength, and intelligence actually only work well when they work together for the good of the whole. For example, intelligence without love is evil, and love without strength of character is impotent. Most importantly, in healthy societies, power and authority are positions of responsibility, which are only honorable and functional when they serve community.
The catch is that the golden three only work when they are connected, but the bonds holding them together tend to fray as social groups grow larger and power becomes more concentrated. So, where leaders in small, well-knit societies (e.g., Native Americans or early Scottish clans) tend to honor their responsibilities to serve community, the bigger a society becomes the more elites grow apart from their people, and the less feedback mechanisms such as shame, religion, and even law serve to check abuse.
As distance and unaccountability grow, community leaders become unresponsive “elites,” and power is increasingly turned toward elite self-service, with less and less regard to harm done to society as a whole. Soon the striving for superiority and winning, which are natural ambitions of strength, becomes the pathological pursuit of power. Today’s pathological power systems include: bankers who crash economies with predatory loans and toxic financial instruments; tobacco companies that hide the evidence that their product is killing people; a military-industrial complex that promotes endless war for corporate gain; and a whole raft of corporations that poison people and planet – all to make more money for elites.
So, where public servants like President Eisenhower once warned us of a corrupt military-industrial complex, today’s isolated and uncaring elites are blithely destroying civilization by killing the planet, eviscerating economies, and corrupting political systems. Think water systems in Flint, Michigan. Like the proverbial frog in boiling water, much of the public has been slow to see the problem because they: 1) trust authority; 2) are hyped up on fear and xenophobia; and 3) are constantly told the current system is natural, necessary, and/or best. Concerned reformers raise red flags, but the mainstream public has been taught to see reformers as dangerous radicals and crazy conspiracy theorists – and the behavior of some extremists confirm these fears.
Elite dysfunction eventually becomes so blatant that bonds of trust and belief disintegrate. As trust crumbles, the society Balkanizes into smaller, polarized, power groups, each defending some cherished cause from conservative community to environmental preservation. As faith in establishment systems dissolves, a power vacuum opens, and regressive and progressive leaders like Trump and Sanders spring up to answer the public’s call for change. Certain individuals and groups gravitate toward neo-fascists like Trump because:
- Fear and frustration drive them towards strength, regardless of intelligence, and Trump exudes “in-your-face” muscle; and
- Establishment elites have so corrupted politics, economics, and the media that few people trust them and trustworthy information is hard to find.
Today’s power systems have become so sociopathic that our survival is now in question. How do we reverse this suicidal trend? There are no pat answers, but understanding how the brain works suggests one thing we need to do is reintegrate love, strength, and intelligence in service to the health of the whole community.
The first step in this reintegration is to re-empower the public. This is where grassroots reform movements come in; they create a countervailing community force that pathological power must reckon with. At the same time, contrary to Occupy-Wall-Street assumptions, countervailing movements need leadership, power, and authority as much as they need grassroots reformers.
Bernie Sanders shows how strong leadership can mobilize a deeply concerned public toward much needed political change funded from the bottom up, but the Koch brothers and Donald Trump show that the devil is in the leadership details. Many people were also afraid to elect Sanders because one guy is not enough. We actually need legions of responsible power-players to develop strong, intelligent, community-serving systems capable of both halting socio-economic destruction, and mobilizing resources to build a truly healthy civilization for all. We need to cultivate such leaders from the bottom up with empowering education. We also need to encourage existing leaders to reclaim their traditional role in service to civilization. We need to organize these power-mobilizers with consciousness-raising and community-building for leaders such as that emerging around socially-responsible business.
Restoring our shattered communities also requires we restore civil discourse by building a conservative-progressive alliance around the values that bind us together – justice, fairness, integrity, community commitment, intelligence, and honorable strength. Societal learning requires both diversity of opinion and the ability to come to agreements about how to proceed for the health of the whole. Our ability to come together has been curtailed by oligarchs spending billions to divide us, but polls show unity is still lurking within, with huge majorities of Americans agreeing on many of the core problems and cures, particularly those relating to abusive power. For example, both sides agree on the need for effective constraints on abusive power including:
- Anti-corruption constraints in government: e.g., get the money out of politics; require conflict of interest recusal in all sectors of government and judiciary; eliminate revolving doors between public and private service.
- Legal constraints on private power, e.g., expand and enforce antitrust laws, especially in media and politics; make violating health, safety, and fraud laws too expensive to continue.
I believe reintegration will also require a clear vision of a positive future, one that reconnects power, community, and learning in pursuit of well-being for all. We must learn to build strong individuals, strong bonds, and freely flowing intelligence by investing in our human and social capital as well as our material and financial systems. We must find a way to build a vibrant civilization with ample opportunities for everyone to live full and meaningful lives, safe from the depredations of uncaring power.
This is what I see as regenerative civilization. It is not as impossible as one might think.
 Maclean, Paul D. (1969). The Triune Brain. New York: Plenum.
Why Extreme Inequality Causes Economic Collapse, February 15, 2016, Dr. Sally Goerner
John Fullerton’s white paper, Regenerative Capitalism, lists eight principles critical to systemic economic health. The Capital Institute’s research group, RARE, uses recent scientific advances – specifically, the physics of flow– to create a logical and measurable explanation of how these principles work to make or break vitality in the human networks of which economies are built. Here we explain why too much inequality is more than a moral problem. In fact, it drives economic systems towards collapse by sucking the life-blood out of real economies worldwide.
According to a recent study by Oxfam International, in 2010 the top 388 richest people owned as much wealth as the poorest half of the world’s population– a whopping 3.6 billion people. By 2014, this number was down to 85 people (and this year, 2017, that number is 8). Oxfam claims that, if this trend continues, by the end of 2016 the top 1% will own more wealth than everyone else in the world combined. At the same time, according to Oxfam, the extremely wealthy are also extremely efficient in dodging taxes, now hiding an estimated $7.6 trillion in offshore tax-havens.
Why should we care about such gross economic inequality? After all, isn’t it natural? The science of flow says: yes, some degree of inequality is natural, but extreme inequality violates two core principles of systemic health: circulation and balance.
Circulation represents the lifeblood of all flow-systems, be they economies, ecosystems, or living organisms. In living organisms, poor circulation of blood causes necrosis that can kill. In the biosphere, poor circulation of carbon, oxygen, nitrogen, etc. strangles life and would cause every living system, from bacteria to the biosphere, to collapse. Similarly, poor circulation of money, goods, resources, and services leads to economic necrosis – the dying off of large swaths of economic tissue that ultimately undermines the health of the economy as a whole.
In flow systems, balance is not simply a nice way to be, but a set of complementary factors – such as big and little; efficiency and resilience; flexibility and constraint – whose optimal balance is critical to maintaining circulation across scales. For example, the familiar branching structure seen in lungs, trees, circulatory systems, river deltas, and banking systems (Fig. 1) connects a geometrically constant ratio of a few large, a few more medium-sized, and a great many small entities. This arrangement, which mathematicians call a fractal, is extremely common because it’s particular balance of small, medium, and large helps optimize circulation across different levels of the whole. Just as too many large animals and too few small ones creates an unstable ecosystem, so financial systems with too many big banks and too few small ones tend towards poor circulation, poor health, and high instability.
In his documentary film, Inequality for All , Robert Reich uses virtuous cycles to clarify how robust circulation of money serves systemic health. In virtuous cycles, each step of money movement makes things better. For example, when wages go up, workers have more money to buy things, which should increase demand, expand the economy, stimulate hiring, and boost tax revenues. In theory, government will then spend more money on education which will increase worker skills, productivity and hopefully wages. This stimulates even more circulation, which starts the virtuous cycle over again. In flow terms, all of this represents robust constructive flow, the kind that develops human and network capital and enhances well-being for all.
Of course, economies also sometimes exhibit vicious cycles, in which weaker circulation makes everything go downhill – i.e., falling wages, consumption, demand, hiring, tax revenues, government spending, etc. These are destructive flows, ones that erode system health.
Both vicious and virtuous cycles have occurred in various economies at various times and under various economic theories and policy pressures. But, for the last 30 years, the global economy in general and the American economy in particular has witnessed a strange combination pattern in which prosperity is booming for CEOs and Wall Street speculators, while the rest of the economy – particularly workers, the middle class, and small businesses – have undergone a particularly vicious cycle. Productivity has grown massively, but wages have stagnated. Consumption has remained reasonably high because, in an effort to maintain their standard of living, working people have: 1) added hours, becoming two-income families, often with two and even three jobs per person; and 2) increased household debt. Inequality has skyrocketed because effective tax rates on the 1% have dropped (notwithstanding a partial reversal under Obama), while their income and profits have risen steeply.
We should care about this kind of inequality because history shows that too much concentration of wealth at the top, and too much stagnation everywhere else indicate an economy nearing collapse. For example, as Reich shows (Figure 1a & b), both the crashes of 1928 and 2007 followed on the heels of peaks in which the top 1% owned 25% of the country’s total wealth.
Fig. 3a Income Share of U.S. Top 1% (Reich, 2013) & 3b Reich notes that the two peaks look like a suspension bridge, with highs followed by precipitous drops. (Original Source: Piketty & Saez, 2003)
What accounts for this strange mix of increasing concentration at the top and increasing malaise everywhere else? Putting aside the parallels to 1929 for a moment, most common explanations for today’s situation include: the rise of technology which makes many jobs obsolete; and globalization which puts incredible pressures on companies to lower wages and outsource jobs to compete against low-wage workers around the world.
But, while technology and globalization are clearly creating transformative pressures, neither of these factors completely explains our current situation. Yes, technology makes many jobs obsolete, but it also creates many new jobs. Yet, where the German, South Korean and Norwegian governments invest in educating their workforce to fill those new jobs, the American government has been cutting back on education for decades. A similar thought holds for globalization. Yes, high-volume industrialism – that is, head-to-head competition over price of mass-produced, uniform goods – leads to a race to the bottom; that’s been known for a long time. But in The Work of Nations (2010), Robert Reich also points out that the companies that are flourishing through globalization and technology are ones pursuing what he calls high-value capitalism, the high-quality customization of goods and services that can’t be duplicated by mass-produced uniformity at cheap places around the world.
So, while the impacts of globalization and technology are profound, the real explanation for inequality lies primarily with an economic belief that, intentionally or not, serves to concentrate wealth at the top by extracting it from everywhere else. This belief system is called variously neoliberalism, Reaganomics, the Chicago School, and trickle-down economics. It is easily recognized by its signature ideas: deregulation; privatization; cut taxes on the rich; roll back environmental protections; eliminate unions; and impose austerity on the public. The idea was that liberating market forces would cause a rising tide that lifted all boats, but the only boat that actually rose was that of the .01%. Meanwhile, instability has grown.
The impact this belief system has had on the American economy and its capacities can be seen in American education. Trickle-down theories are all about cutting taxes on the wealthy, which means less money for public education, more young people burdened with huge college debt, and fewer American workers who can fill the new high-tech jobs.
To be fair, this process is not just about greed. Most of the people who participate in this economic debacle do not realize its danger because they believed what they were told by the saints and sages of economics, and many are rewarded for following its principles. So, what really causes the kind of inequality that drives economies toward collapse? The basic answer from the science of flow is: economic necrosis. But, let me flesh out the story.
Institutional economists talk about two main types of economic strategies: extractive and solution-seeking. (Hopefully, these names are self-explanatory.) Most economies contain both. But, if the extractive forces become too powerful, they begin to use their power to rig the rules of the economic game to favor themselves. This creates what scientists call a positive feedback loop, one in which “the more you have, the more you get.” Seen in many kinds of systems, this loop creates a powerful pull that sucks resources to the top, and drains it away from the rest of the system causing necrosis. For example, chemical runoff into the Gulf of Mexico accelerates algae growth. This creates an escalating, “the more you have, the more you get” process, in which massive algae growth sucks up all the oxygen in the surrounding area, killing all of the nearby sea life (fish, shrimp, etc.) and creating a large “dead zone.”
Neoliberal economics set up a parallel situation by allowing the wealthy to use their money to extract ever more money from the overall economy. The uber-wealthy grow wealthier by:
Paying for policy favors – big corporate bailouts and subsidies; lobbying; etc.
Removing constraints on dangerous behavior – removing environmental protections; not prosecuting financial fraud offenders; ending Glass-Steagall, etc.
Increasing the public’s vulnerability – increasing monopolistic power by diminishing antitrust regulations; limiting the public’s ability to sue big corporations; limiting Medicare’s ability to negotiate for lower pharmaceutical rates; limiting bankruptcy for student loans, etc.
Increasing their own intake – rising CEO salaries and escalating Wall Street gambling; and limiting their own outflows – externalizing costs, cutting worker wages and lowering their own taxes.
All of these processes help the already rich concentrate more, and circulate less. In flow terms, therefore, gross inequality indicates a system that has: 1) too much concentration and too little circulation; and 2) an imbalance of wealth and power that is likely to create ever more extraction, concentration, unaccountability, and abuse. This process accelerates until the underlying human network becomes exhausted and/or the ongoing necrosis reaches a point of collapse. When this point is reached, the society will have three choices: learn, regress, or collapse.
What then shall we do? Obviously, we need to improve our “solution seeking” behavior in realms from business and finance to politics and media. Much of this is already taking place. From socially-responsible business and alternative forms of ownership, to democratic reform groups, alternative media, and the new economy movement – reforms are arising on all sides.
But, the solutions we need are also often blocked by the forces we are trying to overcome, and impeded by the massive merry-go-round momentum of “business as usual.” Today’s reforms also lack power because they are taking place piecemeal, in a million separate spots with very little cross-group unity.
How do we overcome these obstacles? The science of flow offers not so much a specific strategy, as an empowering change of perspective. In essence, it provides a more effective way to think about the processes we see every day.
The dynamics explained above are very well known; they are basic physics, just like the law of gravity. Applying them to today’s economic debates can be extremely helpful because the latter have devolved into ideological debates devoid of any scientific foundation.
We believe Regenerative Economics can provide a unifying framework capable of galvanizing a wide array of reform groups by clarifying the picture of what makes societies healthy. But, this framework will only serve if it is backed by accurate theory and effective measures and practice. This soundness is part of what Capital Institute and RARE are trying to develop.
 RARE = Research Alliance for Regenerative Economics
 The “physics of flow” refers to the study of flow-networks, meaning any system whose existence arises from and depends on the circulation of critical resources and/or information throughout the entirety of their being. Living organisms depend on the circulation of nutrients and oxygen. Ecosystems depend on the circulation of carbon, oxygen, water, etc. Economic systems depend on the circulation of money, information and resources. The physics of flow uses universal principles and patterns of flow to clarify what makes economies healthy over long periods of time. While “living systems” are flow networks, the advantage of using the broader-case principles is that there is no question about whether the results are merely a metaphoric extrapolation from ecosystems.
 2013 Documentary film, http://inequalityforall.com